With the Japanese Yen Approaching the 100 Mark, Intervention Risks Rise
- Key industry insiders are warning that the Bank of Japan may intervene in the markets sooner rather than later.
With the massive rally in the Japanese yen and its slowing economy in recent quarters, the risks for an open intervention on the currency market by the Bank of Japan is increasing. While the mandate of the central bank is not related to managing the currency, the Japanese finance ministry has the authority to mandate the central bank to defend the markets from increased Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term.
With the rapid swings in the price of the Japanese yen being unwelcome at best, one of the key experts on the habits of the Japanese authorities when it comes to interventions, Eitsuke Sakakibara, dubbed Mr. Yen, has shared his views with Bloomberg.
He highlighted that the foreign Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term rate should be reflecting the difference between monetary policy in the U.S. and Japan, and that the impact of the Bank of Japan’s aggressive monetary easing is likely to taper off.
The Japanese currency has increased over 15 per cent throughout the first half of 2016
The Japanese currency has increased over 15 per cent throughout the first half of 2016 with Sakakibara betting on intervention from the Bank of Japan. That said, Mr. Yen has also highlighted that current market intervention would have to be in agreement with the United States, a scenario which is seen as unlikely at current levels.
Only a break below the 100 mark and a drop towards 90 would warrant the consensus from G7 peers that would allow the BoJ to conduct direct intervention.
Daily Chart of the USD/JPY rate throughout 2016, Source: NetDania
The Japanese yen has been consistently overperforming in recent quarters despite the Bank of Japan being one of the most aggressive monetary policymakers on the world. Last Friday, the Finance Minister of Japan Taro Aso said that the country has to coordinate with other countries in order to tackle the Japanese yen's volatility.
With the massive rally in the Japanese yen and its slowing economy in recent quarters, the risks for an open intervention on the currency market by the Bank of Japan is increasing. While the mandate of the central bank is not related to managing the currency, the Japanese finance ministry has the authority to mandate the central bank to defend the markets from increased Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term.
With the rapid swings in the price of the Japanese yen being unwelcome at best, one of the key experts on the habits of the Japanese authorities when it comes to interventions, Eitsuke Sakakibara, dubbed Mr. Yen, has shared his views with Bloomberg.
He highlighted that the foreign Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term rate should be reflecting the difference between monetary policy in the U.S. and Japan, and that the impact of the Bank of Japan’s aggressive monetary easing is likely to taper off.
The Japanese currency has increased over 15 per cent throughout the first half of 2016
The Japanese currency has increased over 15 per cent throughout the first half of 2016 with Sakakibara betting on intervention from the Bank of Japan. That said, Mr. Yen has also highlighted that current market intervention would have to be in agreement with the United States, a scenario which is seen as unlikely at current levels.
Only a break below the 100 mark and a drop towards 90 would warrant the consensus from G7 peers that would allow the BoJ to conduct direct intervention.
Daily Chart of the USD/JPY rate throughout 2016, Source: NetDania
The Japanese yen has been consistently overperforming in recent quarters despite the Bank of Japan being one of the most aggressive monetary policymakers on the world. Last Friday, the Finance Minister of Japan Taro Aso said that the country has to coordinate with other countries in order to tackle the Japanese yen's volatility.